Standing Committee F

Mr. Roger Gale

Finance Bill

(Except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134 and schedules 1, 5 and 38)

Roger Gale: Good morning, ladies and gentlemen. Hon. Members, including myself, have a slight problem, in that security in the Room is so secure that we cannot get our boxes out of the cupboard. Officers of the House are doing their utmost, and I am sure that our personal belongings will be released in due course. In the meantime, I propose that we proceed as best we can, although I am sure that we shall cope.
 On another matter, we have taken up with the authorities of the House the matter of acoustics in the Room, and the hon. Member concerned has been advised. The authorities are looking into the matter and, indeed, into the whereabouts of the key.

Clause 53 - Tax relief for expenditure on vaccine research etc

Question proposed, That the clause stand part of the Bill.

Howard Flight: Good morning, Mr. Gale. The Opposition want to use this clause stand part debate to find out why the Government have chosen a rather complex system of tax credits when a more straightforward system of grants would surely have been more suitable. Hon. Members will be aware that we tabled a new clause on the issue, but it went outside the scope of the Bill and was not valid. The crucial question is, however, why the Government have introduced fairly complex fiscal legislation when the matter could be handled more simply through grants. Dare I suggest that this has something to do with the Treasury taking unto itself powers that might more suitably rest with the Department for International Development?

Paul Boateng: Clause 53 and schedules 13 and 14 introduce a new tax relief for spending on medical research and development. The new relief will apply to spending on vaccines and medicines for preventing or treating tuberculosis and malaria, vaccines for preventing HIV infection, and vaccines and medicines for preventing and treating forms of AIDS that are found mostly in developing countries.
 The hon. Gentleman asked why we chose a tax credit rather than grants, and I expect that he will have some sympathy with the answer when he takes time to reflect on the matter. The tax credit is targeted at a 
 specific case of market failure. When it comes to treating most of the diseases and conditions that affect the developed world, we and our constituents can rely on the pharmaceutical industry, which has an excellent track record on research and development. In that respect, this country is pre-eminent in the world, and that is true in terms of its history and tradition and of its current market position. Although we can rely on the industry and the market to deliver on most health issues, there has been a market failure in this case, and we are promoting a market-based solution. 
 We could have used grants, although that might have cost more. That approach would not, however, have been as successful in underpinning the market. As I have told the hon. Gentleman before, the Government believe in the market and in its ability to deliver if it is properly regulated. It is strange to find that all the market sceptics are on the Conservative Benches. Who would have thought that that day would come? However, it explains why we are sitting here and they are sitting there.

Michael Jack: I am most grateful to the Minister for letting me intervene. Can he help me by defining what he means by market failure and can he analyse why he thinks that the market has failed in this case?

Paul Boateng: I can give the right hon. Gentleman a very simple explanation of our thinking. It has been informed by the work that we are doing with DFID and the pharmaceutical industry. The companies involved are the first to tell us that they have two concerns. First, they have shareholders whom they must satisfy and to whom they have certain fiduciary responsibilities. Secondly, they see themselves, as health providers, as having a moral purpose and a degree of corporate responsibility. They recognise that they have skills and an infrastructure for research and development, but—they are very upfront about it—there is no market because the developing world does not have the resource base available to it either to put in place the infrastructure or to fund the research and to buy its product. Having been involved in creating the structure of the credit, they are looking to us to prompt and assist the research and development by putting that incentive in place. But of course—this is where the hon. Member for Arundel and South Downs (Mr. Flight) is so wrong—we do that in co-operation with DFID.
 The notion that the Treasury is seeking to take powers unto itself could not be further from the truth. The further away that Conservative Members are from any return to the Treasury, the more sceptical they become about its taking powers unto itself—hence the state of extreme scepticism that the hon. Gentleman lumbers in when he makes that sort of point. I know where he is coming from, but I hope that my explanation has set his mind at rest. Given that a fifth of the world's population—1.2 billion people—survive on less than a dollar a day, if we are to stimulate a market in that sort of health provision, we have a responsibility to take the action that we are taking. 
 That was the thinking behind the measure. Companies undertaking or sponsoring such research will be entitled to deduct from their corporation tax profits an additional 50 per cent. of their own expenditure or the cost of subcontracting such research to other companies or institutions. They will also receive relief in full on contributions to independent research into the target diseases by universities, charities or scientific research organisations—that has been particularly welcomed by those organisations and institutions. The relief will be on top of either the new R and D tax credit for larger companies detailed in clause 52 or the R and D relief for small and medium-sized companies introduced in the Finance Act 2000. Small and medium-sized enterprises and companies with insufficient profits to offset the relief in full will be able to claim a vaccines tax credit equivalent to 24 per cent. of the cash cost of qualifying research. 
 I hope that the clause and its schedules will find favour with the Committee.

Michael Jack: Good morning, Mr. Gale, and welcome again to the Chair. As it looks likely that the Government will find their way to obtaining the Committee's approval on the clause and the schedule, I shall probe the Financial Secretary further about the choice of the qualifying activities as defined in paragraph 4 of schedule 13. Paragraph 4(4) clearly states that
''references to vaccines or medicines are to vaccines or medicines for use in humans.'' 
The Financial Secretary will be aware that many infections that pose risks to animals subsequently, for economic reasons, pose risks to humans. Indeed, in the case of bovine tuberculosis there is a potential direct risk to humans. He will also be aware of the intense debate during the recent outbreak of foot and mouth disease about the particular role that so-called smart vaccines might play in that context. 
 In the less-developed world, foot and mouth disease is endemic. I do not want to trespass too far on to a debate about animal diseases, but I hope that I have illustrated that there is a case to be made for giving assistance to the development of appropriate medicines and vaccines to counteract animal diseases, particularly in the context of the less-developed world. Foot and mouth exists outside developed Europe and if it is discovered somewhere, that means an immediate ban on the import into the United Kingdom of meat from that place. That can have an economic effect just as devastating as some of the illnesses that are prevented by the vaccines that the clause already defines.

Chris Grayling: Does my right hon. Friend accept that taking the steps that he is describing would have practical, material benefits for the United Kingdom, given that foot and mouth may have been caused by meat smuggled illegally or legally?

Roger Gale: Order. The hon. Gentleman must address the Chair.
 Mr. Jack: I accept what my hon. Friend says, but I do not want to stray into a full-scale debate on areas that are not subject to the clause. I use the animal illustrations to exemplify my concern about the restriction in paragraph 4 of schedule 13.
 The provisions currently focus on particular diseases. On the World Health Organisation's website, the organisation's department of communicable disease surveillance and response publishes a current list of conditions that are serious in global terms. The list includes cholera, dysentery, influenza, HIV/AIDS, Leishmaniasis, meningococcal disease, plague, sleeping sickness, rabies and viral haemorrhagic fevers, including Ebola and Lassa. BSE is also mentioned, as are salmonosis, brucellosis and anthrax. 
 I am intrigued, because if the World Health Organisation identifies those diseases as being of major importance and ones on which the world should be focusing, why does the schedule identify the principal diseases as tuberculosis, malaria and human immuno-deficiency virus conditions? I can understand that the Treasury would want to reduce its exposure by ensuring that the measure does not include everything in the field of medicines and immunisation—there is an element of targeting. However, if we are to address issues of global poverty and global disease in a world of highly mobile individuals, it would enable the Treasury to be more flexible if there were some relationship between those diseases that the WHO identifies as risks and what we are prepared to help to counter. 
 Paragraph 4(3) of schedule 13 states: 
 ''The Treasury may make provision by regulations further defining the purposes referred to'' 
in the sub-paragraphs. If I have understood those correctly, they deal with the definitions of what may currently be helped. Will the Financial Secretary give me some comfort by telling me that the provision is a first stab, and that there may be more to come?

Howard Flight: My right hon. Friend has made an important point, which is that the definition as a tax relief in the provision makes it somewhat inflexible to the changing needs of medical priorities. His point is that even the priorities of today do not appear to be adequately covered.
 In the Red Book, the Government state that they expect the provision to cost nothing in 2003-04, £10 million in 2004-05 and £20 million thereafter, so they do not think that there will be a particularly material effect. Our discussions with the industry lead us to suggest that if we are serious about trying to be effective, targeted grants would be more helpful. We have added 14 pages of complex fiscal legislation to something that, when we consider the expected cost, looks too much to us like tokenism rather than a serious attempt to help. In our judgment, the route taken is not necessarily the most effective.

Paul Boateng: The right hon. Member for Fylde (Mr. Jack) has characteristically made a serious and significant point, but it is not the point that the hon. Member for Arundel and South Downs raised. The
 right hon. Gentleman is not complaining about the inflexibility of the measure, but rightly probes what it might offer to meet the wider health challenges that he outlines. The WHO has been intimately involved in the development of the proposal. Representatives of that body sit with those of the industry and of the developing world on a committee chaired by my right hon. Friend the Secretary of State for International Development, and it fully supports the measure.
 The points made by the right hon. Gentleman were right. The WHO recognises 21 groups of infectious diseases, of which the three biggest killers in the developing world are TB, malaria and HIV/AIDS. That is why we have focused on them--they account for about 6 million deaths a year. 
 The hon. Gentleman made a point about grants. The focused relief has to be seen as part of a wider package of measures to alleviate the burden of disease in the developing world. As part of those measures, we have pledged $200 million to the global fund established to provide developing countries with the resources to purchase drugs and medicines for AIDS, TB and malaria, among other problems. 
 Extension of the relief to other diseases at the moment might dilute the incentive for companies to concentrate additional resources on research and development into the key diseases. We could not extend it to research into all the infectious diseases that afflict poorer people in the developing countries without substantially reducing the 50 per cent. rate at which the relief is given. 
 The right hon. Gentleman was right to point out the scope within the legislation to extend the powers by regulation. That is because the HIV virus mutates rapidly in response to changing conditions, as right hon. and hon. Members on both sides of the Committee will know. Therefore, we have included a provision to allow us to add further strains to the list of those eligible for research relief as new forms of the virus develop and are identified by medical science. 
 The wider question of whether there might be scope for such relief in relation to animal diseases that pose a threat to public health globally or to the economy in the developing world is interesting. Using relief in that way will doubtless be monitored carefully to see what scope it has for use in other areas of public and development policy—subject always to there being a market failure, because that is what it is designed to address. The right hon. Gentleman makes an interesting point, and it is worthy of consideration. 
 I have spent quite some time with the industry both in Committee and bilaterally discussing the question of grants, but I have not heard the call being made for extensive grants in the terms described by the right hon. Gentleman, not least because the industry recognises the substantial contribution that we are making to the global fund. The industry also recognises that grants and development aid have to be directed to creating the infrastructure through which those goods might be marketed and distributed in the developing world. Without that, all of this would be a waste of space. 
 I hope that the Committee will feel able to give the clause, and its schedules, a fair wind. 
 Question put and agreed to. 
 Clause 53 ordered to stand part of the Bill.

Schedule 13 - Tax relief for expenditure on vaccine research etc

Howard Flight: I beg to move amendment No. 5, in page 207, leave out lines 18 to 20 and insert—
 '(1) This Schedule applies to expenditure incurred on or after 1st April 2002.'.

Roger Gale: With this it will be convenient to discuss amendment No. 6, in page 209, line 38, leave out from 'after' to end of line 39 and insert '1st April 2002'.

Howard Flight: These are simple amendments. We see no reason, nor has one been advised to us, why the provision should not take effect straight away but should be left in the ether to be implemented at some unspecified time. The amendments would therefore ensure that the start date is the beginning of the present tax year.

Paul Boateng: I can give the hon. Gentleman the assurance that he seeks. There is no danger whatever of the provisions being left in the ether, as he so picturesquely describes it. I assure the Committee that we intend the measure to be implemented as soon as we have the necessary state aid approvals. It is necessary to get state aid approval, but we have every confidence that the Commission will give it. However, as it may affect competition in trade between European Union member states, it is necessary to obtain such approval. We propose bringing the provisions into effect on a date appointed by the Treasury, which we expect will be soon after receiving approval.
 The measure is intended, as we have indicated, as an incentive to industry to commit new resources to discovering vaccines and medicines for the prevention and treatment of those diseases. They know that it is coming. They are doing work in that area and know that we are seeking Commission approval. There is no uncertainty or doubt as to our intentions. I hope, with that assurance, that the hon. Gentleman will not press the amendment to a Division.

Howard Flight: I thank the Minister for that response. May I cheekily ask, in what I trust will be the unlikely event of the proposals being ruled out of order by the European Union on competition grounds, that the Government consider the alternative of specific grants being made to specific companies on the ground that it would be purely humanitarian expenditure?

Paul Boateng: The measures are as likely to be refused by the Commission as the hon. Gentleman is to disappear into the ether. We can be absolutely sure that both of them will be around for a considerable time. I hope—with my assurance of his fate as well as
 the fate of the measures—that the hon. Gentleman will not feel the need for me to give him such an undertaking.
 No one can doubt the commitment of the House and the Government to the cause of development aid and global health. I have every confidence that the Commission will give the necessary approvals as the measures are consistent with Community objectives. Therefore, the scenario that the hon. Gentleman paints, in which it is necessary to fill the gap with grants, will not occur.

Howard Flight: I thank the Minister for his reply and I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Schedule 13 agreed to. 
 Schedule 14 agreed to.

Clause 54 - Gifts of medical supplies and equipment

Question proposed, That the clause stand part of the Bill.

Roger Gale: With this, it will be convenient to take new clause 2—Gifts of medical supplies and equipment (No. 2)—
 '.—(1) Where on or after 1st April 2002 any person (''the donor'') makes a gift of relevant goods from trading stock for a relevant purpose then:
(a) no amount shall be required to be brought into account as a trading receipt or gain in consequence of the making or receiving of the gift; and
(b) the costs of making and delivering the gift shall be deducted as an expense of the trade of the donor in computing the profits of that trade.
 (2) Where the donor or any person connected with him receives any benefit in money or money's worth attributable to the making of that gift, then for the accounting period in which the benefit is received the donor shall be deemed to be in receipt of income chargeable to tax under Case VI of Schedule D on an amount equal to the higher of—
(a) any relief claimed pursuant to subsection (1), and
(b) the amount of the benefit in question.
 (3) The Secretary of State may by order prescribe relevant purposes and relevant goods to have effect for the purposes of this section, either generally or in respect of a given time or situation. Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of subsection (2).'.

Howard Flight: The clause offers tax incentives to companies for gifts made from trading stock of medical supplies or equipment for human use and humanitarian purposes. There are two incentives: first, the value of the gift is not included in the company's tax computations, so the company will get a full tax deduction for the cost of acquiring the stock without having to show any corresponding income. Secondly, any costs of transportation, delivery or distribution incurred by the company will also be tax deductible. If the company or a person connected to the company receives a benefit from the gift, the company is taxed on the value of that benefit. The Treasury has given
 power to determine which supplies and equipment the incentives do not apply to. The tax reliefs apply to gifts made on or after the beginning of the tax year.
 We have three objections, which is why we introduced the new clause. First, the incentives would apply to companies alone, not to unincorporated businesses. Although there may not be many such unincorporated businesses, why should they not be covered in the event that they have something to contribute? 
 Secondly, War on Want has raised concerns that the measures could be used for drug dumping—making gifts of drugs that may be good products but are not especially useful in over-supply. 
 Thirdly, the measures apply to medical supplies or equipment given for humanitarian purposes, but there is no definition as to what constitutes medical supplies or equipment or, indeed, humanitarian purposes. Under corporation tax self-assessment, companies are required to assess their tax liabilities to the best of their knowledge. Would it not be helpful, therefore, to provide guidance as to what will constitute qualifying gifts? As drafted, the clause provides help only for humanitarian purposes and does not give incentives for gifts of supplies and equipment that may help emergency recovery in event of disasters.

Chris Grayling: I want to raise an issue of clarification with the Minister and, if his clarification should prove disappointing, to stimulate thought within the Treasury about the classification of equipment used for the care of the elderly. That equipment may not fall under the definition of medical equipment, but under the auspices of the clause it is plausible that a company might make a donation of equipment to provide home care for the elderly. Such equipment is often discriminated against by the tax system. For example, VAT is payable on the purchase of stairlifts or handrails for the home. The clause may open up another discriminatory area against such equipment.
 One can imagine a company donating to Age Concern, for example, a set of household care equipment for the elderly that the organisation could use for people who are in need of such equipment. My suspicion is that such a donation would not fall within the terms of the clause. Will the Minister consider making it an eligible area of equipment, by amending the clause and returning to it on Report or on another occasion?

Paul Boateng: The clause introduces a new relief for corporate donations of medical supplies and equipment. It removes a potential tax charge on corporate donations of medical supplies made for humanitarian purposes and allows companies to deduct from their taxable profits the cost of transporting, delivering and distributing those goods. From 1 April, the new relief will encourage companies to donate medicines, medical supplies and equipment to developing countries without incurring a tax charge and in the full knowledge that the cost of getting donations to recipients will be tax deductible.
 This debate, engendered by the new clause, has been helpful, and I shall try to answer the points that have been raised. We want the provision to be enabling rather than regulatory. It would have been possible to take the approach suggested by the hon. Member for Arundel and South Downs and introduce a raft of regulations, but we chose an enabling approach, which was favoured in the representations that we received from the charitable sector and from industry. It maximises the flexibility of such bodies in determining how best to respond to the sort of philanthropic impulse outlined by the hon. Member for Epsom and Ewell (Chris Grayling) in his interesting example. Provided that companies comply with the requirements of the clause and the gift is made for humanitarian purposes, donors and recipients will have the assurance that gifts of medical supplies and equipment can be made without the donor suffering a tax charge. 
 The hon. Member for Arundel and South Downs favoured a different approach, whereby tax relief would be available only for goods given in accordance with regulations made by the Secretary of State. I do not understand why anyone would want to increase the burden of regulation, especially in this area. Instead of a clear enabling measure that will help willing donors and recipients to get together, the hon. Gentleman's approach would restrict relief to defined gifts in defined circumstances. In fact, it goes against the thrust of the argument of the hon. Member for Epsom and Ewell, and I shall return to his interesting point in a moment.

Howard Flight: The point that the new clause seeks to make is clear. There seems to be some uncertainty about what falls within the definitions, which could be a deterrent and a hassle. In addition, there is the issue of potential drug dumping, which is not unknown, and we must find a straightforward way of dealing with that.

Paul Boateng: I shall deal with the issue of drug dumping immediately. Within this enabling, rather than restrictive and over-regulatory, framework, we are seeking to encourage donors to comply with the World Health Organisation guidelines on drug donations, to which the guidance that the Inland Revenue issues to its inspectors will refer. That will ensure the appropriate conduct of donors. However, as the hon. Gentleman will be aware, the guidelines do not have legal force in the United Kingdom, and there would be a real problem in making entitlement to a statutory relief dependent on a code that has no legal force. Companies already receive relief for donations in kind made to UK charities, and there is no evidence to suggest that that has led to widespread abuse. We are extending the treatment of donations made for humanitarian purposes directly to other bodies such as overseas charities or public health authorities, and there is no reason to think that that will lead to misuse.
 On the interesting point made by the hon. Member for Epsom and Ewell, I recognise the issue that he outlined as a real one. In a previous incarnation as Under-Secretary at the Department of Health, it gave 
 me a great deal of cause for concern, and successive Governments for many years have been exercised as to where to draw the line. A proper debate is needed on the issue, but we cannot have it in the context of this narrow, focused measure. 
 There is an ongoing dialogue among Age Concern, Help the Aged, several other medical and old people's charities, the Department of Health and my Department about the issues. Guidelines are in place, but there are also lines to be drawn. I shall certainly explore the issue and give the hon. Gentleman in correspondence an indication of the aids that would come under the definition as it is in the measure and those that, frankly, would not at this time. We cannot deal with the wider and vexed issue as a side wind of the measure, but it is certainly well worth keeping under review.

Mark Field: One issue that has not been raised is that of unincorporated businesses. I apologise if the Financial Secretary was coming to it. I appreciate that there is provision for sole traders to make various donations and receive tax benefits as individuals. However, in the City of London there are several large law firms, for example—obviously, unincorporated businesses—that have been involved for a period of years in collective schemes that would fall within the confines of the measure. International law firms have international links through which they help in disasters. Has any thought been given to extending the provision to such businesses?

Paul Boateng: I was about to deal with unincorporated businesses. Before the hon. Gentleman spoke, I was racking my brains to think of unincorporated institutions that were big enough or in a position to make such donations. If I was doing that, I suspect that others were as well, although, obviously, I cannot know. However, the hon. Gentleman's intervention has helped concentrate my mind. I, too, can think of law firms that undoubtedly have made similar donations in the past in response to appeals from organisations such as Afro-Aid and others. The issue is worth exploring, and I shall do so. If evidence shows that there is a capacity on the part of unincorporated businesses to make such donations, we are certainly prepared to consider an extension. I shall reply to Members on the issue before Report.

Howard Flight: Another example would be new businesses constructed as limited partnerships in the venture capital world, which may be doing important work of that nature.

Paul Boateng: I am grateful for that comment. If hon. Members have practical examples of unincorporated organisations that are thinking of, or might be in a position to, make similar donations, it would be helpful if they could give them to me so that we can explore the issue to see how we might make provision for them. I hope that with that assurance the clause will be given a fair wind.
 Mr. Flight: I have one final question. The Financial Secretary said that the definitions will be covered by IR guidance based on WHO guidelines. My fourth question is whether, in the event of a disaster, emergency recovery would be covered, as opposed to a broad humanitarian course. It may be intended, but clarification would be helpful.

Paul Boateng: A donation will be treated as having been made for humanitarian purposes if it is genuinely appropriate to the needs of the recipient. Therefore, if there is a genuine need of recovery in the circumstances that the hon. Gentleman's describes, it will count as humanitarian. The definition is not meant to be restrictive; it is to ensure that donations are appropriate. It is designed to achieve in an enabling way exactly what the hon. Gentleman would seek to achieve in a regulatory or restrictive way. I assure him that the Inland Revenue's approach to the definition of ''humanitarian purposes'' is and will be as I have outlined.

Howard Flight: I thank the Financial Secretary for that reply, but I should like further clarification. In the event of a disaster, there are medical needs but also the separate issues of food, housing and other things that fall under the category of supplies. Is the right hon. Gentleman saying that the provision would be limited to medical equipment?

Paul Boateng: I am. The clause is limited to medical supplies and equipment for humanitarian purposes. It is not meant to deal with food relief, which the hon. Gentleman will appreciate is a different form of relief.
 Issues about the definition of medical supplies—such as whether the preparation of instant food for young babies comes under foods or medicines—cannot be resolved here. Such borderline issues will be interpreted by the Inland Revenue, as usual.

Howard Flight: I thank the Financial Secretary. All of our concerns have been answered, although I look forward to him addressing the unincorporated business issue.
 Question put and agreed to. 
 Clause 54 ordered to stand part of the Bill. 
 Clause 55 ordered to stand part of the Bill. 
 Schedule 15 agreed to.

Clause 56 - Community investment tax relief

Howard Flight: I beg to move amendment No. 28, in page 38, leave out from beginning of line 39 to end of line 9 on page 39 and add—
 '(3) Schedules 16 and 17 shall come into force on 1st April 2002.
 (4) For the purposes of subsection (3), Schedule 16 shall have effect in relation to—
(a) investments made on or after 17th April 2002, and
(b) claims made in a year of assessment ending on or after 17th April 2002.
 (5) For the purposes of subsection (3), Schedule 17 shall have effect so that—
 (a) paragraphs 2 to 4 shall have effect for years of assessment ending on or after17th April 2002, and 
(b) paragraph 5 of Schedule 17 shall have effect for accounting periods endingon or after that day.'.
 The amendment addresses the same issue as has been raised previously. It would commence the community investment tax with the provisions on 17 April 2002, rather than a day to be appointed in the future. Perhaps it is for the same EU reasons that a day has not been specified, but we should like to understand the Government's thinking.

Paul Boateng: The clause introduces the community investment tax credit, which is a tax incentive to increase the flow of private investment in disadvantaged communities. The incentive is one of the Government's responses to recommendations by the social investment taskforce, which reported to the Chancellor in October 2000. We are enormously indebted to Ronnie Cohen and others on the taskforce for the work that they have done, which has enabled us to introduce measures in this way. The aim is to increase the supply to communities of development finance, which should act to stimulate enterprise, boost employment and reduce social exclusion. We want to target not only a wide range of businesses but the social enterprises that can play such an important part in providing premises and other facilities to under-invested communities.
 Existing community development financial institutions are a vital connection between capital markets and enterprises in disadvantaged areas. They act as intermediaries channelling capital to enterprises that are too small or not sufficiently mainstream to be financed from the usual sources. CDFIs themselves can face difficulties in gaining access to capital: a failure that the community investment tax credit is designed to address. The hon. Gentleman's amendment is designed to probe why we have introduced the measure in the way that we propose, and would bring the legislation into force from 1 April. 
 For similar reasons to those that I gave the Committee to reject the hon. Gentleman's last amendment, I urge them to reject this one. We have drafted regulations dealing with CDFI accreditation, which have been published by the Small Business Service. Comments on those and supporting administrative processes have been invited, and the use of an appointed day order will give us the opportunity to consider fully any emerging points before the scheme is introduced. Because of the way that the taskforce went about its work, which was rooted in the experience of the venture capital industry that helped us develop the proposal, one of the great strengths of the scheme is that at every stage we have moved with the full support and involvement of the industry and those who are being supported and encouraged in making investment decisions that will benefit them and the wider community.

Mark Hoban: There was an announcement in the Financial Times last week or the previous week that indicated that the Treasury had
 invested £20 million alongside a further £20 million from the venture capital sector, including Apax which is chaired by Sir Ronald Cohen. Is that funding intended to go into a CDFI, or is it additional funding?

Paul Boateng: I will come to the hon. Gentleman's specific point in a moment because there are several initiatives in that area, including the Phoenix fund, and I do not want inadvertently to mislead the Committee in terms of where the funds are going. This particular proposal stands on its own merits, irrespective of any identified funds that might be used in such a way. I will get back to the hon. Gentleman on that specific tranche of resource.
 We are anxious to ensure that we take into account the representations made by business concerning the accreditation regulations. I do not want us to be inhibited in that by being required—as we would be—to bring the tax credit into immediate effect. We are in the course of discussions with the European Commission on state aid issues before the legislation comes into effect. I want to be confident that we have secured that before bringing the clause into effect, as I was on the previous occasion. 
 It is important that we have a dialogue with the Commission, not least because in relation to the rest of Europe we have an opportunity to lead the way in the development of disadvantaged areas through partnership with the private sector. I want to ensure that the Commission is on board and supportive, and that our proposals can be emulated elsewhere in the European Union. We are confident of a positive outcome, but the discussions must take place. 
 The hon. Member for Fareham (Mr. Hoban) raised a point about the specific fund and, although I have a different sum, I think he was referring to the Bridges community development venture fund, which was launched by my right hon. Friend the Chancellor and my right hon. Friend the Secretary of State for Trade and Industry on 14 May. That £40 million fund aims to address market failure in the provision of venture capital to deprived areas. It complements the measure by providing larger amounts of equity capital to businesses with high growth potential suitable for venture capital investment. 
 The Phoenix fund is a £96 million fund run by the Small Business Service, which invests in organisations working to provide better access to business support and finance in deprived areas. Some of that supports capacity building in the CDFI sector and, again, the CITC will help to capitalise that. 
 With that assurance, I hope that the Committee will give the clause a fair wind. It is an exciting development, linking the combating of social exclusion with the promotion of enterprise in some of our most disadvantaged areas.

Rob Marris: Can my right hon. Friend the Financial Secretary say whether the clause and schedule apply to co-operatives and credit unions, which I and many Labour Members are keen to encourage?
 Mr. Boateng: We are taking a range of other measures specifically to support co-operatives and credit unions, in which my hon. Friend the Economic Secretary takes a particular interest. It would certainly be open to the Co-operative bank, other co-operative societies and credit unions that hold resources in this area to participate in this initiative when they have brought their specific proposals within the general accreditation rules. The provision is not aimed specifically at co-ops and credit unions, but, subject to the accreditation rules, they will be able to participate. My hon. Friend the Economic Secretary is working with the co-operative movement and credit unions on a number of specific initiatives that will assist them and other mutuals.

Howard Flight: I thank the Minister for his explanation. When the provisions covering CDFIs are put into effect, I am sure that the Government will make it clear in any announcement that these are not new or additional provisions, but the final implementation of proposals in the Budget.
 I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Clause 56 ordered to stand part of the Bill.

Schedule 16 - Community investment tax rlief

Question proposed, That this schedule be the Sixteenth schedule to the Bill.

Howard Flight: I want to refer to issues arising in schedules 16 and 17 and to point out to the Government some of the concerns raised, mainly by the Law Society. The relief is more of a subsidy than a tax relief and delivering such through the tax system will create complexity for both the Revenue and investors, particularly when the Revenue might not otherwise normally be involved in the provision of such direct grants.
 Loan amounts can be repaid over a period and if they are repaid early or transferred relief will be withdrawn. In those circumstances the withdrawal of relief appears to take place from the year before the year in which the event giving rise to the withdrawal occurs and paragraph 42 of the explanatory notes to schedule 16 gives an example. That seems a little unjustified. The withdrawal of relief takes the form of an assessment under schedule D, case VI, for the tax year or accounting period for which the relief was obtained. If the withdrawal relates to the tax year or accounting period for which it was obtained, could not the tax liability for that year simply be reinstated because that might allow other reliefs to be used against that tax liability? An assessment under schedule D, case VI, is less flexible in that context. 
 Follow-on loans do not in many circumstances achieve tax relief, presumably because there is a danger than if a loan is made to a CDFI a subsequent loan can be made and the sums subsequently lent used to repay the earlier loan. However, the CDFI might need a further loan and the second loan might be far greater 
 than the original loan. Could that not be dealt with differently by allowing a subsequent loan to gain relief if the former loan is repaid out of profits or available funds of the CDFI? There is a cap on the total loan relief available to a CDFI. 
 Finally, provisions are included that prevent a CDFI being reconstructed without a disposal of the shares, securities and loans held in that CDFI. Why has that provision been included?

Michael Jack: I should like to ask the Financial Secretary a number of questions, but I want to say at the outset that I welcome anything that brings investment into what are defined in schedules 16 and 17 as ''disadvantaged areas''.
 Paragraph 1 of schedule 16 refers to ''An individual or company'' and I am pleased that the schedule recognises the role of the individual investor. Forgive me if I have misunderstood, but it seems that an individual who wishes to take advantage of the relief can do so only by routing their investment through an approved institution. I should like to know why an individual who may want to make a personal investment into the sort of enterprise that is approved under schedules 16 and 17 might not do so in a straight line--that is, by putting the money into the activity rather than routing it through a financial intermediary. I may have misunderstood and perhaps the Financial Secretary can enlighten me. 
 I now turn to paragraph 4(2) of schedule 16, in which the phrase ''disadvantaged communities'' is first used. Again, I apologise if I have missed a point in this long and detailed schedule, but what is the definition of ''disadvantaged communities''? I ask that question because within potentially affluent areas there may be communities that are extremely disadvantaged which could benefit from the community-strengthening institutions that are to be invested in, which is one of the purposes of the measure. 
 The way in which the schedule is drafted gives it an urban feel, but what about rural disadvantaged areas? I am delighted that the body language of the Financial Secretary conveys that rural Britain may also benefit. When he replies, will he explain the definition because European Union schemes to help disadvantaged areas already have delineated zones. The Minister will be aware that there are often fearsome brushfire wars in the Government over where the boundaries of those zones are to be drawn. Changes have taken place since that was last done, and it is important that we have some indication of what disadvantaged areas are. Has the matter been settled, or can it be debated later? 
 Paragraph 5(3)(a) states that provision can be made by regulation 
''for appeals to the Special Commissioners against refusals to grant accreditation''. 
It is good that there is an appeals mechanism, but the idea that the provisions are so complex and so difficult that those involved in certain schemes will end up at a special commission hearing makes me question 
 whether the Treasury or the Government will give us a simple, easy-to-understand explanation that prevents people from taking advantage of sub-paragraph (3)(a). How will the intention be communicated to the investing community? 
 Paragraph 7 draws our attention to the fact that an 
''accreditation has effect for a period of three years beginning on such day as may be specified''. 
A project may last longer than three years, however, and my hon. Friend the Member for Arundel and South Downs referred to renewal. I should be grateful if the Financial Secretary would say a word or two about those who invest in, for example, a five-year regeneration project, but where the accreditation, in the initial sense, will last for only three years. If such projects are okay for the first three years and do the same thing in the last two years, would it not be sensible to have a little more flexibility and to proceed project by project, rather than having a fixed five-year period? 
 I am glad that the hon. Member for Wolverhampton, South-West (Rob Marris) mentioned credit unions and other micro-financial institutions at the community level, because my attention had been drawn to them by paragraph 8. I was delighted when the Financial Secretary said that the Economic Secretary was working on the issue, because those responsible may not want to fund community-based financial institutions through a loan security or a share. 
 Paragraph 13 is headed ''Pre-arranged protection against risks'' and makes it clear that projects will not be assisted if someone takes out cover against financial failure. The Financial Secretary made an interesting point, however, when he put the issue in a European context. Projects might attract finance from outside the United Kingdom, and it would not be unrealistic for those who provide the money to have a hedging arrangement to cover the financial risk involved in the currency transaction. Would such risk cover prevent a project from being agreed, given that it relates to a different kind of risk, involving a currency element? It would also be interesting to know how the European funds accessed by some projects might be treated under the proposals. 
 Paragraph 19(4) in part 5 contains words that need a little teasing out. It states: 
 ''The investor is entitled to make a claim for relief for a relevant tax year if-- 
 (a) it appears to him that the conditions for the relief are for the time being satisfied''. 
That is an interesting formulation, because it implies that those on both sides of the equation could decide that the conditions were not satisfied. There will be uncertainty if an inspector comes along and says, ''I know that this was a flexible project, but you're not doing what you set out to do.'' Will the Financial Secretary sketch in how the test of whether the conditions are 
''for the time being satisfied'' 
will operate? People would like to think that they will not be subject to all kinds of review once they have gone to the trouble of proving that the scheme is eligible for the three years, as set out in the Bill. I might 
 be exaggerating the import of those words, but some words of comfort from the Financial Secretary would be helpful. 
 I have a final, general, point. The measure restricts the amount of investment in residential accommodation that can be assisted—in fact, it expressly excludes it. I could hear business expansion scheme bells ringing loudly in the Treasury when that was drafted. It goes on to restrict the proportion of money that can be invested in property development and commercial property. That is an important area for clarification. In run-down inner-city areas, it is often property-based activity that generates extra economic activity. I am worried that the understandable caution of the Treasury, which previously had its fingers burned by venture-based activity such as business expansion, might be unnecessarily restrictive when property matters are considered. 
 It is a little disappointing that residential accommodation has also been eliminated. In either an urban or a rural situation, the generation of low-cost social housing might be the route to developing an area and to encouraging the kind of institutional development that the measure seeks to encourage, but which is now expressly excluded. Would the Financial Secretary be kind enough to enlighten us on how this part of the measure is to operate?

Paul Boateng: Let me begin by addressing two philosophical points that have been flung up by the contributions of the right hon. Member for Fylde and the hon. Member for Arundel and South Downs. For the second time today, Opposition Members have suggested that we might have gone down the grant road and have asked why we did not. That represents a fundamental misunderstanding of what we, as a Government, are about. Where regeneration is concerned, history teaches us that grants by themselves are not enough. They literally do not do the business. We are about encouraging the flow of private and commercial capital, with the disciplines that that can bring through the community development finance sector, and the enterprise that it can stimulate. We have learnt—successive Governments have tried it—that grants do not have the same effect. That is why we have chosen our route.
 In response to the hon. Member for Fareham, I indicated a number of other things that we are doing to assist the growth of the community development finance sector, when appropriate, some of which involve public expenditure. The Phoenix fund involves an element of public expenditure, which is right and proper. If the sector is to grow and mature, however, it must increasingly be able to attract sustainable private investment. 
 The community investment tax credit offers community development finance institutions the opportunity, but—I now turn to the point made by the right hon. Member for Fylde—it is no use pretending that growing businesses in disadvantaged areas do not need support. The entrepreneurial spirit is written off by all too many folk, yet all right hon. and hon. Members must know that even in the most 
 disadvantaged and run-down areas, whether urban or rural, people with good ideas, get-up-and-go and drive still find themselves unable to gain access to capital. 
 Sometimes, however, it is not only a question of finance, which is why we have chosen this route. Businesses in disadvantaged communities that cannot access mainstream finance also need specialist business support. We have decided to use CDFIs because, with the best will in the world, they will be generally much better placed to deliver than individuals. That is the reason for the bar on individuals. To meet the point made by the right hon. Gentleman, individuals will be able to invest through the enterprise investment scheme.

Michael Jack: I was putting my remarks forward in the spirit of the Bill's drafting. Is the Financial Secretary happy, for instance, that the lottery has made a grant of £120 million for the regeneration of Wembley stadium?

Paul Boateng: Oh please! I am not going to fall for that, Mr. Gale. I would soon be out of order were I to share with the Committee my views on Wembley stadium--tempted as I have been, I have kept a complete omerta in relation to that subject on the Floor of the House and in Committee—save to say that the stadium is in my constituency.
 I want now to deal with some of the more detailed points raised this morning.

Roger Casale: Before my right hon. Friend leaves the philosophical discussion and turns to the details, may I suggest that in today's world we cannot hope to turn around disadvantaged communities only with grants or handouts. We need to look for more imaginative policies. We need to empower people to transform their communities and to give them support, but we also need to put in place measures that will encourage everyone in the community to contribute. We live in a different world from that of the previous Conservative Administration, and we need more imaginative policies such as those suggested by the Government.

Paul Boateng: I could not agree more.

Chris Grayling: Will the Financial Secretary give way?

Paul Boateng: I am looking at the approaching hour and I am keen to make some progress. I wish to deal with the specific points raised by the hon. Member for Arundel and South Downs and as many of the points raised by the right hon. Member for Fylde as I can in the time available. The first response is to both their questions, but is especially relevant to the point raised by the right hon. Member for Fylde, who went about the dangerous business of interpreting my body language. The body can deceive, as the hon. Member for Arundel and South Downs knows only too well.

Dawn Primarolo: What do you mean?

Paul Boateng: Well, expectation does not always match reality.
 If the right hon. Member for Fylde interprets my body language correctly, he will know that the Government believe that disadvantaged communities are not simply to be found in urban areas. There are pockets of rural disadvantage that have languished for many years, and this Government have, with a passion, set about tackling rural disadvantage. That is why we have adopted a scheme that will serve rural areas as much as urban areas. Geographic communities in qualifying areas, either electoral wards or postcode areas, will be selected on the basis of indices of multiple deprivation for England, Scotland, Wales and Northern Ireland. The percentage of each index that will qualify has not yet been finalised. For CDFIs that serve non-qualifying areas, the accreditation process will provide the opportunity to present evidence of disadvantage. For thematic communities, it would be for the CDFI to justify why the community is especially disadvantaged, with reference to published statistics and other evidence relating to characteristics such as age, gender, ethnicity and disability.

Iain Luke: Can the Financial Secretary confirm that, in Scotland, the disadvantaged areas will be those that are classified as social inclusion partnership areas under Scottish Executive definitions of deprivation?

Paul Boateng: I would be surprised if most, if not all, of them were not covered by the definition, but we have been careful to avoid either taking the simple European route, which the right hon. Member for Fylde counselled me against, or using any simplistic existing grouping of the sort that my hon. Friend describes. That is why we are using indices of multiple deprivation and why the lists of qualifying area will be revised following any updates to each country's index of deprivation. Scotland will maintain its own index to ensure that it is kept up to date. Lists will be revised so that neither Scotland, Northern Ireland, Wales or England will miss out as the index of deprivation is developed.

Mark Field: I welcome the Minister's comprehensive explanation of the issue of disadvantaged communities. However, like me, the Minister represents a central London seat, and he will know that, even in electoral wards, there are often great disparities. Therefore, might not those areas need to be broken down into smaller units, such as polling districts in electoral wards? Some of the most deprived polling districts in my constituency are in what are considered to be safe Conservative wards, and there is a risk that those small pockets will be swallowed by areas of relative affluence.

Paul Boateng: It will be a surprise to the citizens of Wembley and the Welsh Harp ward to be described as living in central London. That is not how it feels to those of us who live there, but I certainly live in a constituency with pockets of deprivation amid wards of relative affluence, albeit it is in outer London. We are satisfied that our approach of assisting CDFIs that
 serve geographic, thematic and non-geographic disadvantaged communities will pick up those communities in most need. We have not wedded ourselves to an especially geographic definition, which is why I am satisfied that we will be able to pick up pockets of rural disadvantage too, as we need to tackle their problems.

Mark Hoban: The issue is important to those of us who have mixed communities within the boundaries of relatively affluent postcode sectors or wards. Will the Financial Secretary give an idea of what might be the minimum population for a qualifying area?

Paul Boateng: I am afraid that I cannot and will not at the moment. Final decisions on what areas qualify and the development of draft regulations are the subject of comments and representations that we are receiving from the community development sector. Decisions will be taken in time to meet our proposed timetable for the first round of accreditation, but our present intention is to base the definition on measures of relative deprivation. I shall write to the hon. Member for Fareham as our thinking develops, but I do not want to get into the subject of population size, as it will not assist at this stage of the argument.
 For those who are interested in indices of deprivation, I shall say that it is generally accepted that those that we have—they are on 2001 for Northern Ireland, 2000 for England and Wales and 1998 for Scotland—need to be and are subject to review, but they have been designed to provide the best evidence possible of deprivation. 
 I will move on—hon. Members will excuse me, because we must make some progress—to some of the specific and detailed points made by the hon. Member for Arundel and South Downs, which have been of concern to the Law Society. Rather than go through each in turn, I would like to write to him specifically on them, which would save considerable time. However, I want to explain why the accreditation period is three years when the holding period for investment is five years. That general point needs addressing. 
 Experience from the Phoenix fund that supports the CDFIs suggested that three years was an appropriate time horizon for fund-raising and loan-planning activities on CDFIs. That period will be adopted for accreditation. It ensures that during the lifetime of any tax advantage investment, an accredited CDFI will have to apply for re-accreditation, thus deterring any possible abuse of the credit. No genuine CDFI that achieves accreditation, and then continues to function in the way suggested by the right hon. Member for Fylde and according to its published business plan, should have any difficulty in achieving further accreditation after three years. 
 An interesting point was raised about hedging and pre-arranged financial risks. Such risks are standard for commercial lending, so that should provide no bar to accreditation. 
 The right hon. Gentleman should not read too much into the involvement of the appeal commissioners. No great difficulties are expected. As he knows, the use of special commissioners is not unusual for tax measures 
 because when there is even a remote possibility of dispute, some means must be provided to resolve the dispute. 
 The right hon. Gentleman is right to raise the question why we should allow any non-residential property development, on which we reflected for some time. We recognise that business and social enterprise cannot grow without suitable premises and other infrastructure. That has often been in short supply in the communities that we seek to help, which is why we decided to allow up to half the money that a CDFI raises through CITC to be invested in non-residential property development. CDFIs have been supportive of that approach to property. 
 We restricted property investment, however. During consultation, much interest was shown in the question and we had extensive discussion with CDFIs. The great danger that we had to take into account was that allowing too great a proportion of CDFI investments into property would create a distortion and make it difficult to raise money for anything but property. That is always the danger—the right hon. Member for Fylde is right. That is why I assented when he referred to the business expansion scheme, but many lessons have been learned from that, and learned the hard way. 
 A balance must be struck, and our proposals provide a fair and reasonable balance between the needs of investors, CDFIs and the enterprises that we seek to help. They strike a balance in terms of property and across the board, so I hope that the Committee gives them a fair wind.

Rob Marris: Will the Minister give us more information on the relationship between the five-year loan period and three-year accreditation period? I may be misreading the schedule, but paragraph 9(3) states that
''the loan must not have been made on terms that allow any person to require'' 
repayment within five years. If someone wants to invest in a CDFI, I would expect the investor to say, ''If accreditation isn't renewed, I shall want my money back.'' Although we want to encourage people to make loans, that would seem to fall foul of paragraph 9(3). Will the Minister explain the relationship?

Paul Boateng: Yes, we do want to encourage people to make loans, but I would not put on the juxtaposition the interpretation that my hon. Friend the Member for Wolverhampton, South-West puts on it. Having a five-year period would not be of much assistance to an investor who makes an investment in year two or later, as there would still be accreditation during the holding period. The tax incentive recognises a number of risks and loss of accreditation is one of them.
 The juxtaposition that my hon. Friend described will not have the effect that he fears. People will have to make a judgment, and it is right that they should consider all relevant factors when they make that judgment. The thrust of the legislation is not to protect people from the consequences of the decisions that they make. It is not to create a situation in which 
 people do not look to make a commercial gain. That is what is so exciting about this—it is motivated by the desire to make a profit. If one is motivated in that way, one has to make a judgment and take into account the various risks that one's profit rewards one for taking. The measure, with its risks and its profits, is designed to promote that spirit of enterprise in our most disadvantaged communities. I hope that that response gives the Committee the assurance that it needs to enable it to give the clause its wholehearted backing and move on.

Howard Flight: In the round, we wish CDFIs well and success. The Minister slightly misinterpreted my point. There is no doubt that venture capital incentives from the public sector have had a poor record and that harnessing private sector venture capital expertise for the benefit of deprived areas is a sensible approach.
 My point was that a tax credit is being used for what amounts to a subsidy—an understandable justification. That makes it complex for both the Revenue and investors. Venture capital trusts, for example, have been relatively successful because they have been relatively simple, and I hope that the complexities inherent in using the tax system will not act as a drag on the success of this scheme. That is related to the issue of the three-year and five-year periods. 
 If we want the measure to succeed, the tax rules need to be as clear and straightforward as possible, but it is difficult conceptually to ensure that for a measure that in reality provides a subsidy. However, we wish the measure well. Let us hope that the outstanding issues will be ironed out satisfactorily. 
 Question put and agreed to. 
 Schedule 16 agreed to. 
 Schedule 17 agreed to.

Clause 57 - Relief for community amateur sports clubs

Question proposed, That the clause stand part of the Bill.

Roger Gale: With this we shall discuss new clause 3—Community amateur sports clubs to be treated as charities—
 '.—(1) The promotion of sport, provision or sports facilities, physical education or healthy recreation by a registered community amateur sports club shall be treated as having a charitable purpose for the purposes of the Taxes Acts with effect from 17th April 2002. 
 (2) Paragraphs 1, 2, 3, 11, 12, 13, 14 and 15 of Schedule 18 shall have effect from 17th April 2002.'.

Howard Flight: The new clause is designed to probe the Government's intentions. Hon. Members will be aware that there has been an historic problem with sports not being deemed suitable activities for a charity. The Charity Commission refined that last November by decreeing that sports activities whose ultimate objectives were health and fitness could be
 viewed as suitable activities for a charity. In principle, that enabled a large number of sports clubs to qualify as charities. However, certain sports do not qualify, including angling.
 Clause 57 and schedule 18 are designed to provide a framework of tax relief to those amateur sporting clubs that either cannot qualify as a charity or that decide that they do not want to do so. However, if an appropriate amateur sporting club is dedicated to a sport that does not qualify for charitable status, why have the Government not, for the sake of simplicity, granted tax exemptions that are parallel to those that would apply if it could qualify as a charity? We have, in effect, two sets of rules for sports clubs, one of which falls into the Inland Revenue's box and the other into the charitable box. They are not greatly different, but a few important differences relate to gifting and trading income. The Revenue impact will hardly be significant, so would it not have been simpler—per what new clause 3 would achieve—to give entirely parallel tax facilities to those available to charities? 
 On the subject of golf clubs and exploitation for social activities, the schedule empowers the Treasury to specify an eligible sport, so protection is retained against an exploitation of the principle. It seems unnecessary, however, to have cluttered up the system with two different tax packages. People who might want to support amateur sports clubs will make mistakes, which puts an onus on those running clubs to understand in detail both the charity rules and the Inland Revenue rules. Does it make sense to introduce a different tax package for such clubs?

John Pugh: I shall put all my remarks into one contribution to save the Committee time and to allow me to probe the Financial Secretary's philosophy on the subject.
 As has been mentioned, we have two distinct but parallel initiatives: the Treasury proposals for sports clubs, and the proposals from the Charity Commission and the Department for Culture, Media and Sport. Clubs are in the enviable position of being able to choose from an a la carte menu. We applaud the Government for doing something to help sports clubs. It is entirely a good thing and, from the Treasury's point of view, very prudent. Given the huge amount of money required for the national health service, we can conclude that a healthier, sportier nation will result in appreciable savings to future health Bills and to law and order as people will be happily exercised in recreational activity. 
 However, the choice between registration under the Treasury regime and charitable status under a different regime is taxing sports clubs a little. I have a briefing from the Rugby Football Union, which is unsure as to how to advise its members. The briefing states that the Treasury proposal has only limited tax exemption for investment, does not include the mandatory rate relief, and that company donations to sports clubs will not qualify for tax relief. On the other hand, it also suggests that the Treasury is much the preferred option, as the regime suggested by the Charity 
 Commission imposes some fairly onerous duties and responsibilities. It makes it clear that the registration of a club as a charity involves a change in ethos, and that certain clubs will not be able to register as charities. Sports clubs are faced with a dilemma and I invite the Financial Secretary to comment on that. 
 I understand the line that the Charity Commissioners have taken; they place an emphasis predominantly on healthy recreation. They specifically exclude activities that they do not regard as healthy recreation. For example, snooker is excluded because, although it has a benefit for people's mental health and amusement, incidental by-products, such as drinking and smoking, are not good for individual health. [Hon. Members: ''What about Rugby?''] I was coming to that. Such sports can create a net disadvantage to the health service. Similarly, the commissioners exempt extreme sports, which are good for cardiovascular fitness but lead to many unnecessary injuries. 
 The Charity Commission's proposals could almost have been designed by the Treasury because, at the end of the day, the bill to the taxpayer is likely to be significantly reduced if the proposals are implemented across the board. However, the Treasury's thinking is not clear. The Bill leaves the registration of sports to the Treasury's discretion. Paragraph 14 of Schedule 18 states that 
'''eligible sport' means a sport that is designated for those purposes by Treasury order.'' 
In other words, it is precisely what the Financial Secretary designates as such. 
 In a way, I have great sympathy for the Financial Secretary. I can understand that he does not want to subsidise activities that would happen anyway. In a sense he wants more bang for the Treasury buck. There are no arguments against keeping the process under tight Treasury control. However, to return to the basic principle, if his philosophy is to have a healthy nation, which is why the tax exemptions are being made, and to ease what we all desire—an expansion of sports facilities, so that they progress and develop—the proposals by themselves do not go far enough. They do not seem to be sufficiently imaginative. 
 If the object of the Treasury is to secure large-scale expansion and real development of sports facilities—I like to think that that is the Treasury's objective, or at least the Financial Secretary's, who I would not expect to be interested in simply cosmetic improvements—the legislation needs to be framed in such a way that it does not fall prey to an obvious accusation. One could take the view that the charity route could be fairly expensive to public finances. One could also take the view that registration might be cheaper. Registration could be seen as a Pied Piper leading people away from the charity route. I do not think that that is necessarily the case, but I should be interested to know what the Financial Secretary feels about it. 
 I shall conclude by offering two further areas for consideration. Many new clubs face horrendous financial hurdles when they are set up, and particularly ambitious ones consider an element of cross-subsidy. I am familiar with a club in my constituency that has 
 used go-karting—a straightforward commercial activity—to fund a range of good and desirable facilities. I am not sure whether it would benefit from any of the exemptions offered by the Charity Commission or the Treasury. I wonder whether the Financial Secretary is considering what might be done in future. 
 A second area of concern is the status of professional clubs that we do not regard as charities. What would happen if they provided open access community provision? Let us take the hypothetical case of a professional football club. Such clubs are very cash-rich, and not candidates for charity—[Interruption.]—well, one or two of them are, but the major league club that I know best, which is closest to me, is Liverpool football club. As we all know, it contributed massively to the psychological well-being of that community. It does not have quite the same effect in Manchester, but it makes a massive contribution to the mental health of Liverpool. If one looks at the area around the ground to see what healthy living patterns exist, one will see deprivation and an absence of sporting facilities. 
 Is there a strong case for future tax exemptions for projects that are linked to professional clubs—there are many such schemes on the continent—and community facilities provided not for the benefit of the club, but the community in which it exists? Is there not further scope to make the fiscal system make a real difference? Is the Financial Secretary tentatively going down a route of responding to a lobby, or is he beginning a genuine and important fiscal journey that could result in the tax system's being used to benefit the health of the nation?

Roger Gale: Order. I am cognisant of the aspirations of the business managers and also of the time available to us this morning. More significantly, because we are here to debate the issues, I am also cognisant of the fact that many issues that are being raised are covered in the following schedules. The clause under discussion is effectively a paving clause for the schedule. Therefore, I hope that hon. Members will understand that if I invite the Minister to respond to those things that he feels are appropriate now, I will also create an opportunity for Members who wish to debate the issues thoroughly to do that when we debate the schedule and schedule stand part.

Paul Boateng: I am very grateful for that indication, Mr. Gale.
 Clause 57 and schedule 18 introduce a package of tax reliefs for community amateur sports clubs. The sports club sector has long lobbied for parity with charities. The Charity Commission's announcement last November that it will recognise the promotion of community participation in healthy recreation by the provision of facilities for the playing of particular sports means that many clubs can now achieve that parity by becoming charities. However, we also realise that some clubs cannot or do not want to apply for charitable status. For those clubs, the separate tax package will provide access to some of the reliefs enjoyed by charities and those who donate to them. 
 In constructing the package, we have tried to strike a balance between supporting the clubs that are the life-blood of so many communities and recognising the interests of charities and other taxpayers, such as small businesses. The provision of the package as a safety net for those clubs that do not achieve charitable status has been widely welcomed. Howard Wells, chairman of the Central Council of Physical Recreation, was good enough to say: 
 ''This is a great day for British sport. We are delighted that Government is listening to the views of sport, and is recognising its contribution to society through the tax system. The CCPR will work with Government to implement these proposals as effectively as possible.'' 
The Sport England chief, David Moffett, said: 
 ''We welcome the Chancellor's announcement as a real boost for CASCs across the country.'' 
A point was raised about the Treasury seeking the power to define sport. Our approach was to adopt the list of Sport England, whose members are the people on the ground who do so much good work with clubs. By adopting its list, we avoided having to make value judgments about particular sports. That should be welcomed by the whole Committee. As soon as the Finance Bill receives Royal Assent, clubs will be able to apply to the Inland Revenue to be registered as community amateur sports clubs. 
 The hon. Member for Southport (Dr. Pugh) discussed the submissions that he has received from rugby clubs. What they are doing, perfectly properly, in the correspondence that he described is presenting the options to their members, who have a choice—not a dilemma but a choice. Of course, clubs must meet the criteria set out in schedule 18 of open membership, being organised on an amateur basis and promoting an eligible sport. An eligible sport will be designated by Treasury order, with reference to Sport England's list of recognised sports. 
 Most clubs are not trading when they carry on their main activity of providing sporting and ancillary relief to their members, so they normally pay no tax on their income. That will not change. Obviously, we have to take into account the nature of the clubs, and encourage and support them in seeking out new sources of funding. 
 The hon. Gentleman asked whether the measure was simply a response to lobbying or whether we have a broader vision. My answer is that we have a broader vision, which has been made clear by my right hon. Friend the Minister for Sport as well as by my right hon. Friend the Secretary of State for Culture, Media and Sport. It is one in which sport can contribute to health and regeneration and that is, I think, the experience of all of us in our constituencies. 
 There will be tax incentives to help individuals to support their local clubs and boost fundraising. However, we are not seeking to push clubs down a particular route. They will have a choice: they can follow the Charity Commission route, which is a welcome option in the light of the commission's decision to relax its approach to the charitability of sports clubs, or they can follow the Inland Revenue route. Both have benefits, depending on the needs of 
 the club, their response to their local community, their traditions and their history. It is for that and the contribution that sport can make that I ask the Committee to welcome the provision, as it has been welcomed by sport generally.

Howard Flight: Of course, relief is welcomed by amateur sports clubs that cannot or find it difficult to qualify for charitable status and the nitty-gritty will be discussed when we come to the schedule.
 The point of principle--the difference between the Revenue package and the charity package--is not hugely material. One issue is that a charity can receive 
 gift aid on company and personal donations, but on the Revenue side it applies only to individual donations. 
 I hope that when the Government consider the matter further they will decide that it is sensible to align the two. The clause is welcome in principle and I look forward to going through the details of the schedule in due course. 
 Question put and agreed to. 
 Clause 57 ordered to stand part of the Bill. 
Further consideration adjourned.--[Mr. Sutcliffe.] 
 Adjourned accordingly at twenty-two minutes past Eleven o'clock till Tuesday 11 June at half-past Ten o'clock. 
Gale, Mr, Roger ( Chairman )
 Boateng, Mr. 
 Brennan, Kevin 
 Casale, Roger 
 Cruddas, Jon 
 Cunningham, Mr. Jim 
 Curtis-Thomas, Mrs. 
 Davey, Mr. Edward 
 Field, Mr. Mark 
 Flight, Mr. 
 Grayling, Chris 
 Hoban, Mr. 
 Jack, Mr. 
Laws, Mr. 
 Luff, Mr. 
 Luke, Mr. 
 Marris, Rob 
 Pond, Mr. 
 Primarolo, Dawn 
 Pugh, Dr. 
 Ryan, Joan 
 Smith, Angela 
 Southworth, Helen 
 Sutcliffe, Mr. 
 Wright, David